Co-op and Condo Tax Abatement To Be Tied to Prevailing Wages

The cherished tax abatement for the residents of housing cooperatives and condominiums – a way of bringing their property tax bills in line with those of the owners of one- to three-family homes – now comes with a new condition. On Labor Day, Gov. Kathy Hochul signed a bill that will limit the tax abatement to the residents of buildings that pay their service employees the prevailing wage. The new condition goes into effect on April 1, 2022.

For buildings with unionized employees, which comprise the bulk of the city’s co-ops and condos, nothing will change. But the definition of “qualified properties” that will be eligible for the abatement now includes properties with an average unit assessed value of $60,000 or less, as well as co-ops and condos with fewer than 30 units that have an average unit assessed value of $100,000 or less. (A building’s or unit’s assessed value, which is used to calculate property tax bills, is a fraction of its market value.)

“This law is intended to provide a living wage to non-union employees,” says Nichole Thomas, an attorney at the law firm Nixon Peabody. “Buildings that don’t pay the prevailing wage will not qualify for the abatement.”

The prevailing wage, which is set by the city’s Office of the Comptroller, is the average wage paid to similarly employed workers. Service employees are those who are regularly employed at a building for at least eight hours per week for its care and maintenance, including watchmen, guards, doormen, building cleaners, porters, handymen, janitors, gardeners, groundskeepers and elevator operators. The prevailing wage and benefits for a doorman total roughly $40 an hour. The schedule of prevailing wages is available here.

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Leni Morrison Cummins, a partner at the law firm Cozen O’Connor, advises boards in non-union buildings to get busy. “Boards need to very quickly evaluate their wages and bring them in line with prevailing wages,” she says. “If boards don’t make this change, they’re about to become very unpopular.” Why? “Because property managers tell me that the amount saved by keeping the tax abatement far exceeds the cost of paying the staff the prevailing wage. Every building is different, of course, and every board needs to make an educated decision.” 

Paul Korngold, a real estate tax lawyer at Korngold Powers, predicts a different kind of fallout from the new rule. “I think this is going to hit new properties, mostly in the outer boroughs, where the sponsor is using non-union workers and paying less than the prevailing wage,” he says.

There’s another wrinkle. Thomas notes that co-ops and condos that apply for the tax abatement must now file an affidavit with their application, certifying that they are paying their service employees the prevailing wage for the duration of the abatement. “The board’s tax consultant or lawyer who applies for the abatement will get the affidavit for the board to sign and submit with the application,” she says. The affidavits are public record and may be introduced before a court of law or administrative tribunal. When filling out the affidavit, therefore, Thomas has two words of advice for boards: “Don’t lie.”